Mediclinic's market problems impact Remgro value

JOHANNESBURG - Investment company Remgro, controlled by the Rupert family, said yesterday that its intrinsic net asset value (NAV) per share decreased 17.9% for the year to end June due to a 40.4% drop in the market value of its Mediclinic investment as well as the dilutive effect of the rights issue.

The drop in Mediclinic’s market value was as a direct result of the rand strengthening against the British pound and problems experienced in the Middle East, it said.

As a result the group’s NAV - the key performance gauge for an investment counter - declined to R251.48 at the end of June, down from R306.44, compared with last year.

However, Remgro reported a 40% increase in headline earnings to R8.22 billion, while headline earnings per share (Heps) increased 32.7% to 1485.5 cents a share.

The group said the difference in the increase between headline earnings and Heps was attributed to the impact of the rights issue during the year under review.

The group said included in headline earnings for the comparative year are once-off transaction costs incurred with the Mediclinic rights issue and Al Noor Hospitals Group transaction, amounting to R788 million, as well as a negative fair value adjustment of R730m, relating to the increase in value of the bondholders’ exchange option of the bonds.

Remgro targets businesses that can deliver superior earnings, cash flow generation and dividend growth over the long term. Chief executive Jannie Durand said Remgro’s investment in its banking and insurance platforms delivered a commendable performance.

“The industrial and infrastructure investments’ contributions to headline earnings showed a noticeable improvement compared to the June 2016 results,” said Durand.

Mediclinic’s contributed to Remgro’s headline earnings of R1.86bn, representing an increase of 19.7% while the banking contributed headline earnings of R3.16bn, up 5.8% compared with last year. The banking division is represented by RMB Holdings.

The contribution from consumer products to Remgro’s headline earnings amounted to R1.35bn, down from R1.61bn, and this represents a 15.6percent decline as compared to a year ago.